A new future for Capital?

Jim Brown, a Bristol based co-operative activist, discusses how we can talk about alternatives to capitalism without being ‘anti-capitalist’.

Capitalism is not a word used much in polite business circles. It pigeonholes the speaker as a hard left, anti-business, academic diehard. Potential audiences switch on the mute button, they’ve heard it all before and don’t want to be preached at again. In making the business case for a pro-enterprise, post-capitalist future, keeping the audience’s attention, words are vital.

I have just semi-retired from a lifetime of work in the co-operative movement where anti-capitalist sentiment is rife. And for good reason. Capitalism, the pursuit of wealth maximisation, lies at the heart of structural inequality in our economy. It is profoundly anti-democratic and environmentally destructive. Capitalism works for capital alone, at the cost of all other stakeholders, especially labour. Opposition to capitalism has defined the labour movement, trade unions and co-operatives.

So far, this opposition has failed, with the global economy now defined by a form of global ultra-capitalism, where wealth has become so concentrated, so dominant, so accepted. It seems that ‘resistance is futile’ and so is anti-capitalism. Instead, I think that the future lies with post-capitalism, where capital is an essential, but not dominant, ingredient in business.

Post-capitalist alternatives

Post-capitalism seeks to build a market economy based on an enterprise model based on the principles of equality, inclusion, equity, democracy, environmental sustainability, community, and human happiness.  This might sound utopian, and many readers will recognise the co-operative principles that lie at the heart of this proposition. For the last ten years I have been working with Co-operatives UK building enterprises founded on these post-capitalist principles. Together, we have supported hundreds of enterprises in the UK that demonstrate the scope for a post-capitalist future, where our basic services, food, power, shops, pubs, community hubs and sports clubs can be financed and run by ordinary people going about their everyday lives.

Inclusion is central to post-capitalism, but maybe in a counter-intuitive way, especially for anti-capitalists. Inclusion means giving democratic rights, one-person-one-vote, to all the stakeholders in an enterprise, including those who work, volunteer and support the enterprise with their practical skills, time and commitment to its purpose. It means including the customers, service users, suppliers, sub-contractors and others who are part of the operational environment of the business. And crucially, it also means including investors, savers and others who provide the finance for the enterprise to function. Enterprises still need capital in a post-capitalist world, just as much as savers and investors need to place their capital where it can be used for the common good and a fair return.

When I first got involved in the workers’ co-operative movement, in the 1970s, there was a raging battle between the common ownership camp and the co-ownership camp, a battle between socialists and liberals. Tony Benn, a Bristol MP and cabinet member, naturally sided with the socialists, rescuing businesses like Triumph Motorcycles and Upper Clyde Shipbuilders, as living examples of Labour’s Clause 4. Joe Grimmond, leader of the Liberal Party, supported co-ownership as promoted by Job Ownership Limited. But co-operative models were poorly understood at a practical and detailed level. Mondragon, the much-feted co-operative of socialist Basques, practise co-ownership not common ownership. John Lewis Partnership is commonly owned through a complex trust settlement which still recognises the founding family and operates without much democracy.

The common ownership camp, with its commitment to workers control and democracy, believes in  share capital being restricted to a membership token of £1 and the assets of the business are indivisible, locked in common ownership for the benefit of current and future generations of workers. The upshot of this form of ownership is that co-operatives are reliant on making and reinvesting profits, or loans, for the capital they need to function. Consequently, capital is always expensive or in short supply, and many new workers’ co-operatives are trapped in a chicken-and-egg situation where they cannot grow to a sustainable size.

The much smaller co-ownership camp took what it considered to be a more pragmatic approach to this problem, encouraging workers to invest in their enterprise, under the banner of job ownership, often with a more laissez-faire approach to democracy and share capital. But few workers could afford to directly invest in their own jobs. Co-ownership came to rely on owners gifting their enterprises to employees, or on employees buying the business using future profits. Ironically, this usually involved the use of an employee benefit trust, which was exactly the same in practice as common ownership. Today, the only difference between the two camps is their take on democracy and workers’ control.

The late 1970s and 1980s proved to be the heyday for workers’ co-operatives, with the numbers shooting up from a handful of nineteenth century survivors (when the first wave happened) to hundreds then maybe a thousand or two at its peak in the mid-1980s. Essential Trading in Bristol, established in 1971, and a devotee of common ownership, finds itself alongside another Bristol business icon, Aardman Animations, a recent convert to employee ownership, the modern manifestation of the co-ownership movement. There are about 30 workers’ co-operatives and employee-owned businesses in Bristol today, an even mix of common ownership co-operatives founded in the last century, and similarly aged businesses that have converted to employee ownership since the turn of the millennium.

Community Business

Community businesses are the new kids on the Bristol block, including a new type financed by community shares. Bristol Energy, The Exchange and Bristol Ferryboats are all examples of businesses structured as community benefit societies that have raised capital from their communities through community share offers. From a co-operative perspective these businesses are a radical departure, encouraging open and voluntary membership to anyone who supports the objects of the society, including investors and savers. In 2012 I helped Co-operatives UK establish the Community Shares Unit, since when over £155m in share capital has been raised from over 100,000 members supporting more than 440 community businesses.

The Community Shares Unit started life in 2009 as a Cabinet Office funded action research programme. The task was to modernise the use of nineteenth century Industrial and Provident Society legislation, the corporate legal form for co-operatives, through projects with ten communities. It received mainstream government funding in 2012 which continued through to 2017, during which time it established a Handbook on good practice, a training and accreditation programme for practitioners and a quality assurance mark for share offers.

In 2014 the Industrial and Provident Societies Act was renamed the Co-operative and Community Benefit Societies Act. This body of corporate law, equivalent to, but separate from company law, lies at the heart of the post-capitalist revolution. It provides for a unique form of share capital that is democratic, non-speculative, non-accumulative and fair for all stakeholders in an enterprise. It rewrites the profit equation of company law which attributes all profits to investors, to instead make profits the asset-locked property of all members, be they workers, customers, suppliers or investors. Investors in a society do so fully at risk, in return for which they receive interest on their share capital at a rate which is no more than is sufficient to attract and retain the investment. Share capital is withdrawable not transferable, which means that when an investor wants or needs their money back, they can withdraw it from the society, at its discretion, rather than sell it to a third party at a speculative price. The asset lock prevents the distribution of residual assets to shareholders, removing the scope for capital gains through the sale of the business.

A new future for capital?

Society law provides for the perfect form of post-capitalist share capital. It relieves employees from the burden of financing their own enterprises and engages all community stakeholders in the purpose, ownership and governance of the society on a democratic basis. That this radical post-capitalist form of share capital has existed since the dawn of capitalism itself, is both remarkable and extraordinary.

I think that it prefigures a new post-capitalist mindset, which is pro-enterprise, pro-investment, inclusive, fair, democratic, and emancipatory. It imagines a new form of active, ethical and engaged investor who will risk their capital in businesses they care about for a limited but fair return. It places investors alongside workers, customers and suppliers as the equal and essential ingredients of the enterprise pie, bound together by the universal suffrage of one-member-one-vote. It puts paid to the capitalist principle of one-share-one-vote.

This emancipatory quality of community shares has been hard for anti-capitalists to accept, since they do not trust investors. The ethos of workers control says democracy is fundamental as long as it does not extend to investors. Community shares has also struggled with a branding problem, the word community not sitting well in the world of enterprise, conjuring up images of amateurism, village halls, and raffle tickets. Community shares has really helped community businesses to thrive. Now is the time to use the same legislation to build a new generation of post-capitalist inclusive enterprises. And Bristol could be the perfect laboratory for this experiment in a future beyond capitalism. Imagine being able to directly invest your pensions and savings in Bristol businesses that are committed to an inclusive economy. As long as everyone can get over that C word!